Rationale for GST

GST, or Goods and Services Tax, is a value-added tax levied on the supply of goods and services
in a country. The main rationale for GST is to simplify and streamline the taxation system by
replacing multiple indirect taxes such as excise duty, service tax, VAT, etc., with a single tax.

Some of the key reasons why governments opt for GST include:

1. Elimination of cascading taxes: Under the previous tax regime, taxes were levied at each
stage of production and distribution, resulting in a cascading effect. GST eliminates this
cascading effect by allowing for input tax credit, which means that businesses can claim a
credit for the tax paid on inputs used in the production of goods and services.

2. Increased tax compliance: GST brings in more transparency and accountability in the tax
system, as all transactions are recorded and reported in the GST system. This makes it
easier for tax authorities to monitor tax compliance and prevent tax evasion.

3. Boost to the economy: By streamlining the taxation system, GST reduces the cost of
doing business, which in turn promotes economic growth. It also eliminates the barriers
to inter-state trade, as GST is a uniform tax across the country.

4. Simplification of tax administration: With GST, businesses need to file only one tax
return instead of multiple returns for different taxes. This simplifies the tax
administration process, reduces paperwork, and saves time and money.

Overall, the introduction of GST is expected to have a positive impact on the economy,
businesses, and taxpayers by simplifying the tax system, promoting compliance, and boosting
economic growth.

Explain the structure of GST

The structure of GST or Goods and Services Tax varies from country to country. However, in
most countries, GST has a similar structure consisting of three main components:

1. Central GST (CGST) - levied by the central government on intra-state supply of goods
and services.

2. State GST (SGST) - levied by the state government on intra-state supply of goods and
services.

3. Integrated GST (IGST) - levied by the central government on inter-state supply of goods
and services and imported goods and services.

Let's look at these components in more detail:

1. Central GST (CGST): This is the tax levied by the central government on the supply of
goods and services within the same state. The revenue collected from CGST goes to the
central government.
 2. State GST (SGST): This is the tax levied by the state government on the supply of goods
and services within the same state. The revenue collected from SGST goes to the state
government.

3. Integrated GST (IGST): This is the tax levied by the central government on the supply of
goods and services between different states or imported goods and services. The revenue
collected from IGST is divided between the central and state governments.

In addition to these three main components, there are also other taxes such as compensation cess,
which is levied on certain luxury goods and sin goods, to compensate the states for revenue loss
due to the implementation of GST.

The GST structure aims to simplify the tax system and ensure that there is no double taxation. By
having a uniform tax across the country, GST reduces the compliance burden on businesses and
promotes ease of doing business.

GST council

The GST Council is a constitutional body in India that was created under the Goods and Services
Tax (GST) Act, 2017. It is a federal body consisting of the Union Finance Minister (who is the
chairperson of the council) and the Finance Ministers of all the states and union territories with
legislatures.

Here are some important notes on the GST Council:

1. Objectives: The primary objective of the GST Council is to ensure that the GST law is
implemented effectively across the country. It is responsible for making
recommendations on all aspects of GST, including rates, exemptions, threshold limits,
and rules and procedures.

2. Meetings: The GST Council meets periodically to discuss and make decisions on various
issues related to GST. The decisions of the GST Council are made by a three-fourth
majority, with the central government having one-third of the votes and the state
governments having two-thirds of the votes.

3. Functions: The GST Council has a number of important functions, including

recommending rates for goods and services, deciding on exemptions and threshold limits,
and deciding on the division of revenue between the central government and the state
governments.

4. Dispute resolution: The GST Council also acts as a dispute resolution mechanism
between the central and state governments, and between the states themselves. It is
responsible for resolving any disputes that arise between the central and state
governments regarding the administration of GST.

5. Review mechanism: The GST Council also has a review mechanism in place to
periodically review the GST law and make recommendations for its improvement. This
review mechanism ensures that the GST law remains relevant and effective in the
changing economic scenario.
Overall, the GST Council is an important body that plays a crucial role in the effective
implementation of GST in India. It acts as a platform for cooperation between the central and
state governments, and ensures that the GST law is administered effectively and efficiently.

GST council

The GST Council is a constitutional body in India that was created under the Goods and Services
Tax (GST) Act, 2017. It is a federal body consisting of the Union Finance Minister (who is the
chairperson of the council) and the Finance Ministers of all the states and union territories with
legislatures.

The GST Council has the following functions:

1. Recommending rates for goods and services: The GST Council recommends the rates for
goods and services that are to be levied under GST. It also recommends changes to the
rates from time to time.

2. Deciding on exemptions and threshold limits: The GST Council decides on the
exemptions and threshold limits for the GST law. It can recommend the exemption of
certain goods or services from the purview of GST, and it can also recommend different
threshold limits for different categories of businesses.

3. Division of revenue: The GST Council decides on the division of revenue between the
central government and the state governments. It recommends the percentage of revenue
that should be given to the states and the percentage that should be retained by the central
government.

4. Dispute resolution: The GST Council acts as a dispute resolution mechanism between the
central and state governments, and between the states themselves. It is responsible for
resolving any disputes that arise between the central and state governments regarding the
administration of GST.

5. Review mechanism: The GST Council has a review mechanism in place to periodically
review the GST law and make recommendations for its improvement. This review
mechanism ensures that the GST law remains relevant and effective in the changing
economic scenario.

Overall, the GST Council is an important body that plays a crucial role in the effective
implementation of GST in India. It acts as a platform for cooperation between the central and
state governments, and ensures that the GST law is administered effectively and efficiently.

GST network

The GST Network (GSTN) is a non-profit, public-private partnership entity that was created to
provide IT infrastructure and services for the implementation of the Goods and Services Tax
(GST) in India. GSTN is responsible for providing a common GST portal for taxpayers,
facilitating the collection of GST, and maintaining a database of all GST registrations, returns,
and payments.
The GSTN has the following functions:

1. IT infrastructure and services: The GSTN provides IT infrastructure and services for the
implementation of the GST law in India. It provides a common GST portal for taxpayers
to register, file returns, and make payments.

2. Registration and identification: The GSTN is responsible for the registration and
identification of all taxpayers under GST. It maintains a database of all GST registrations,
returns, and payments.

3. Facilitation of tax collection: The GSTN facilitates the collection of GST by providing a
platform for taxpayers to file returns and make payments. It ensures that all GST
payments are credited to the appropriate government account.

4. Data management and analysis: The GSTN maintains a database of all GST registrations,
returns, and payments. It also provides data analytics and insights to the government to
facilitate policy decisions.

Overall, the GSTN plays a crucial role in the implementation of GST in India. It provides a
common platform for taxpayers to register, file returns, and make payments, and ensures that the
GST law is administered effectively and efficiently.

Important terms and definition under GST

Here are some important terms and definitions related to GST:

1. Goods and Services Tax (GST): GST is a value-added tax that is levied on goods and
services at each stage of production and distribution. It is a comprehensive indirect tax
that replaced multiple indirect taxes in India.

2. Input Tax Credit (ITC): Input tax credit is the credit that a taxpayer can claim for the
tax paid on purchases used for business purposes. It is available only for goods and
services used for business purposes and not for personal use.

3. Taxable supply: Taxable supply refers to any supply of goods or services that are subject
to GST. It includes both goods and services that are liable to GST.

4. Exempt supply: Exempt supply refers to any supply of goods or services that are exempt
from GST. Exempt supplies are not subject to GST, and the taxpayers cannot claim input
tax credit on these supplies.

5. Zero-rated supply: Zero-rated supply refers to any supply of goods or services that are
subject to GST at a rate of 0%. The taxpayers can claim input tax credit on the tax paid
on inputs used to make zero-rated supplies.

6. Composition scheme: The composition scheme is a simplified tax scheme for small
businesses with a turnover of up to Rs. 1.5 crore. Under this scheme, taxpayers can pay a
fixed percentage of their turnover as tax, without maintaining detailed records.
 7. Place of supply: Place of supply refers to the location where the goods or services are
supplied. It is used to determine the applicability of GST, and whether the supply is intra-
state or inter-state.

8. GSTIN: GSTIN stands for Goods and Services Tax Identification Number. It is a unique
15-digit identification number that is assigned to every registered taxpayer under GST.

9. GST council: The GST Council is a constitutional body that is responsible for making
recommendations on all aspects of GST, including rates, exemptions, threshold limits,
and rules and procedures.

10. GST return: A GST return is a document that contains details of a taxpayer's business
activities, including sales, purchases, input tax credit, and tax paid. It is filed by the
taxpayers on a monthly or quarterly basis, depending on their turnover.

Meaning and scope of supply in GST

The concept of supply is one of the key components of the Goods and Services Tax (GST)
system in India. Under GST, the term 'supply' is defined very broadly, and it includes all forms
of supply of goods or services, whether or not for a consideration.

The scope of supply under GST includes the following:

1. Sale: Sale of goods or services for a consideration, including exchange, barter, lease,
rental, license, or disposal.

2. Transfer: Transfer of title in goods or services, including transfer of right to use goods or
services, and lease or hire of goods.

3. Barter: Exchange of goods or services without using money as consideration.

4. Renting: Renting or leasing of goods or services, including letting out of immovable

property, hiring of machinery or equipment, and granting of a license or franchise.

5. Import and export: Import of goods or services into India, and export of goods or services
out of India.

6. Supply of services: Provision of services, including supply of professional services,

transportation services, accommodation services, and financial services.

7. Composite supply: Composite supply refers to a supply made up of two or more goods or
services, which are naturally bundled and supplied in conjunction with each other.

8. Mixed supply: Mixed supply refers to a supply of two or more goods or services, which
are supplied together, but not naturally bundled.

In short, the scope of supply under GST is very broad and covers a wide range of transactions
involving goods and services. It is important for taxpayers to understand the definition of supply
under GST to ensure that they comply with the applicable rules and regulations.

Composite and mixed supply in GST

Under the Goods and Services Tax (GST) system in India, the concept of supply is broadly
defined to include all forms of supply of goods or services, including composite and mixed
supplies. Here are the definitions of composite and mixed supply under GST:

1. Composite Supply: Composite supply refers to a supply made up of two or more goods
or services that are naturally bundled and supplied in conjunction with each other, where
one of the goods or services is the principal supply. In other words, a composite supply is
a supply of a package of goods or services, where one of the goods or services is
dominant and the others are ancillary.

For example, a restaurant may supply a meal that includes food, beverages, and cutlery. In this
case, the food is the principal supply, and the beverages and cutlery are ancillary supplies. The
supply of the meal is a composite supply, and the tax rate applicable to the principal supply (food)
will apply to the entire supply.

2. Mixed Supply: Mixed supply refers to a supply of two or more goods or services that are
supplied together, but are not naturally bundled. In other words, a mixed supply is a
supply of goods or services that are not normally sold together and do not form a single
unit of supply.

For example, a store may sell a laptop along with a laptop bag. In this case, the laptop and the
bag are not naturally bundled, and they do not form a single unit of supply. The supply of the
laptop and the bag is a mixed supply, and the tax rate applicable to each of the goods will apply
to their respective values.

In summary, the distinction between composite supply and mixed supply is based on whether the
goods or services supplied are naturally bundled or not. In the case of composite supply, the
goods or services are naturally bundled and form a single unit of supply, while in the case of
mixed supply, the goods or services are not naturally bundled and are supplied together but do
not form a single unit of supply.

Zero rated supply

In the Goods and Services Tax (GST) system in India, a zero-rated supply refers to the supply of
goods or services that is eligible for a zero rate of tax. This means that no GST will be charged
on such supplies, but the supplier of the goods or services is eligible to claim a refund of the
input tax credit (ITC) paid on the inputs used to make the supplies.

Zero-rated supplies are typically made to entities outside the country, such as exports or supplies
made to Special Economic Zones (SEZs) or to a person who has been notified as an SEZ
developer or SEZ unit. The objective of zero-rating such supplies is to make the goods or
services competitive in the global market by making them tax-free, thus promoting exports.

The following supplies are considered zero-rated under GST:

1. Export of goods or services: The supply of goods or services that are exported outside
India.
 2. Supply of goods or services to SEZ: The supply of goods or services to SEZs or to a
person who has been notified as an SEZ developer or SEZ unit.

3. Supplies made to a merchant exporter: The supply of goods to a merchant exporter who
exports the goods within three months from the date of supply and who has received an
order or a letter of credit for the supply of those goods.

4. Supplies made to a Special Economic Zone unit or developer: The supply of goods or
services to a unit or developer located in a Special Economic Zone.

5. Supply of goods or services to a foreign diplomatic mission or consulate.

In summary, zero-rated supplies are supplies of goods or services that are not subject to GST and
the supplier is eligible to claim a refund of the ITC paid on inputs used to make the supplies.
Such supplies include exports of goods or services, supplies to SEZs, merchant exporters, and
Special Economic Zone units or developers, and supplies to foreign diplomatic missions or
consulates.

Registration under CSGT/ SGST Act

Under the Goods and Services Tax (GST) system in India, any person who is engaged in the
supply of goods or services, and whose annual turnover exceeds the prescribed limit, is required
to register for GST. Here are the steps to register for GST under the Central GST (CGST) and
State GST (SGST) Acts:

1. Visit the GST portal: The first step to register for GST is to visit the official GST portal
(www.gst.gov.in) and click on the "Services" tab. From the drop-down menu, select
"Registration" and then click on "New Registration".

2. Enter the required details: The next step is to enter the required details such as the legal
name of the business, PAN, email address, and mobile number. The system will then
send an OTP to the registered mobile number and email address for verification.

3. Fill the registration application: Once the verification is completed, the applicant needs to
fill the registration application form by providing the necessary details such as business
address, type of business, and bank account details.

4. Upload documents: The applicant needs to upload the required documents such as PAN
card, Aadhaar card, business address proof, bank statement, and other relevant documents.

5. Submit the application: After filling the form and uploading the documents, the applicant
needs to submit the application. The application will be processed by the GST officer and
a GSTIN (Goods and Services Tax Identification Number) will be issued if the
application is approved.

In summary, registration under CGST and SGST Acts is mandatory for businesses with an
annual turnover exceeding the prescribed limit. The registration process involves visiting the
GST portal, entering the required details, filling the registration application form, uploading the
required documents, and submitting the application for processing by the GST officer. Once the
application is approved, a GSTIN will be issued.

Avoidance of dual control in GST

Avoidance of dual control is an important aspect of the Goods and Services Tax (GST) system in
India. Dual control refers to the situation where both the central government and the state
government have the power to assess, audit, and collect tax from a taxpayer. This can create
confusion and lead to disputes between the central and state tax authorities.

To avoid dual control, the GST system in India follows a dual administrative structure. Under
this structure, both the central government and the state government have the power to
administer and collect GST, but with clearly defined roles and responsibilities.

The GST Council, which is a body consisting of representatives from both the central and state
governments, is responsible for making recommendations on all aspects of GST, including the
division of tax administration between the central and state governments.

The GST system in India follows the following principles to avoid dual control:

1. Destination-based taxation: GST is levied at the point of consumption or the destination

state. This ensures that the state where the goods or services are consumed receives the
revenue.

2. Division of powers: The GST system clearly defines the powers and responsibilities of
the central and state tax authorities. The central tax authority is responsible for the
administration of GST for goods and services that are imported or exported, and the state
tax authorities are responsible for the administration of GST for all intra-state supplies of
goods and services.

3. Single registration: The GST system requires only a single registration for both central
and state GST. This ensures that taxpayers do not have to register separately with
different tax authorities.

4. Joint audit: The GST system allows for joint audits by both the central and state tax
authorities. This ensures that the taxpayer is not subjected to multiple audits by different
tax authorities.

In summary, the avoidance of dual control is an important aspect of the GST system in India. To
achieve this, the GST system follows a dual administrative structure, with clearly defined roles
and responsibilities for both the central and state tax authorities. The system also follows
destination-based taxation, division of powers, single registration, and joint audits to ensure that
taxpayers are not subjected to multiple audits and disputes are minimized.

Maintenance of accounts and records in GST

Under the Goods and Services Tax (GST) system in India, registered taxpayers are required to
maintain certain accounts and records to comply with the GST laws. Here are the details of the
accounts and records that are required to be maintained under GST:
 1. Accounts of outward supplies: A registered taxpayer needs to maintain a record of all the
goods and services that are supplied or sold. This includes the name of the customer,
invoice number, date, and value of the supply.

2. Accounts of inward supplies: A registered taxpayer needs to maintain a record of all the
goods and services that are purchased or received. This includes the name of the supplier,
invoice number, date, and value of the supply.

3. Input tax credit register: A registered taxpayer needs to maintain a record of all the input
tax credits that are claimed on the purchases made for the business.

4. Records of payment of tax: A registered taxpayer needs to maintain a record of all the
taxes paid to the government.

5. Accounts of goods held in stock: A registered taxpayer needs to maintain a record of all
the goods that are held in stock as on the date of filing the GST returns.

6. Records of goods lost, stolen, or destroyed: A registered taxpayer needs to maintain a

record of all the goods that are lost, stolen, or destroyed during the business operations.

7. Accounts of output tax payable and paid: A registered taxpayer needs to maintain a
record of the output tax payable on the sales made and the output tax paid to the
government.

8. Records of delivery challans issued: A registered taxpayer needs to maintain a record of

all the delivery challans issued for the transportation of goods.

9. Records of GST invoices issued: A registered taxpayer needs to maintain a record of all
the GST invoices issued for the supply of goods or services.

All the above records and accounts must be maintained for a period of 6 years from the end of
the financial year in which they were prepared. It is important to note that the maintenance of
these records and accounts is essential for compliance with GST laws and for claiming input tax
credit.

In summary, registered taxpayers are required to maintain specific accounts and records under
the GST system in India. These include accounts of outward and inward supplies, input tax credit
register, records of payment of tax, accounts of goods held in stock, records of goods lost, stolen,
or destroyed, accounts of output tax payable and paid, records of delivery challans and GST
invoices issued. It is important to maintain these records for at least 6 years from the end of the
financial year in which they were prepared.

Tax invoice under GST

Under the Goods and Services Tax (GST) system in India, a tax invoice is a crucial document
that is issued by a registered supplier to the recipient of goods or services. A tax invoice is used
to show the amount of GST that is payable on the supply of goods or services.

Here are the details that must be included in a tax invoice under GST:
 1. Name, address and GSTIN of the supplier

2. A consecutive serial number not exceeding 16 characters, containing alphabets or

numerals or special characters hyphen or dash and slash symbolized as “-” and “/”
respectively, and any combination thereof, unique for a financial year.

3. Date of issuance of invoice

4. Name and address of the recipient

5. GSTIN of the recipient (if they are registered)

6. Description of the goods or services supplied

7. HSN code or SAC code (depending on the turnover of the taxpayer)

8. Quantity and unit of measurement (for goods)

9. Total value of the goods or services supplied, after deducting any discounts or abatements

10. Rate of tax (CGST, SGST, IGST or cess) and the amount of tax payable

11. Signature of the supplier or his authorized representative

It is important to note that for supplies of goods or services that are below Rs. 200 (per item or
per invoice), the supplier is not required to issue a tax invoice. Instead, they can issue a
consolidated bill of supply.

In summary, a tax invoice is a crucial document that must be issued by registered suppliers under
the GST system in India. It must contain specific details such as the name, address and GSTIN of
the supplier, date of issuance, name and address of the recipient, description of the goods or
services supplied, HSN or SAC code, quantity, total value, rate of tax and signature. For supplies
below Rs. 200, a consolidated bill of supply can be issued instead of a tax invoice.

What is tax invoice

A tax invoice is a legal document that is issued by a registered supplier to the recipient of goods
or services. It is an essential document under the GST system in India, and it contains details of
the transaction, including the amount of tax payable. The tax invoice acts as evidence of supply
and is used for claiming input tax credit.

In a tax invoice, the supplier includes the details of the goods or services supplied, along with the
price and the tax payable on the transaction. The tax payable includes Central Goods and
Services Tax (CGST), State Goods and Services Tax (SGST) or Integrated Goods and Services
Tax (IGST), depending on the type of supply and the location of the supplier and recipient.

A tax invoice must include specific details, such as the name, address and GSTIN of the supplier,
date of issuance, name and address of the recipient, description of the goods or services supplied,
HSN or SAC code, quantity, total value, rate of tax and signature. It is important to note that the
tax invoice must be issued within a specific time frame, depending on the type of supply.
In summary, a tax invoice is a crucial document that is issued by a registered supplier to the
recipient of goods or services. It contains details of the transaction, including the amount of tax
payable, and acts as evidence of supply. A tax invoice must include specific details and must be
issued within a specific time frame.

Explain credit notes and debit notes in GST with examples

In GST, credit notes and debit notes are documents used to record adjustments made to a tax
invoice that has already been issued. These documents are used to correct errors or omissions in
the original tax invoice.

A credit note is issued when a supplier needs to reduce the value of a tax invoice already issued.
It is issued when goods or services are returned by the recipient, the value of goods or services
supplied is less than the amount charged in the original tax invoice, or if the tax charged is more
than what is actually payable. The credit note decreases the tax liability of the supplier, and the
recipient can claim the input tax credit based on the credit note.

For example, if a supplier issues a tax invoice for Rs. 10,000 but later realizes that the actual
value of goods supplied was only Rs. 9,500, they can issue a credit note for Rs. 500, which will
reduce their tax liability. The recipient can use the credit note to claim input tax credit.

A debit note, on the other hand, is issued when a supplier needs to increase the value of a tax
invoice already issued. It is issued when goods or services are supplied at a higher price than
what was charged in the original tax invoice or if the tax charged is less than what is actually
payable. The debit note increases the tax liability of the supplier, and the recipient can claim the
input tax credit based on the debit note.

For example, if a supplier issues a tax invoice for Rs. 10,000 but later realizes that the actual
value of goods supplied was Rs. 11,000, they can issue a debit note for Rs. 1,000, which will
increase their tax liability. The recipient can use the debit note to claim input tax credit.

In summary, credit notes and debit notes are documents used to adjust the value of a tax invoice
already issued. A credit note is issued when the value of goods or services supplied is less than
what was charged in the original tax invoice, and a debit note is issued when the value of goods
or services supplied is more than what was charged in the original tax invoice. These documents
help to correct errors or omissions in the original tax invoice and ensure that the correct amount
of tax is paid.

E-way bills

E-way bill is an electronic document that is required for the movement of goods worth more than
Rs. 50,000 from one place to another, either within a state or across state borders. The E-way bill
is generated through the GSTN (Goods and Services Tax Network) portal, and it is used to track
the movement of goods in real-time.

Under GST, the E-way bill is mandatory for all interstate movement of goods, and some states
have also made it mandatory for intrastate movement of goods. The E-way bill is generated by
the registered supplier or transporter of the goods, and it contains details of the consignment,
such as the goods' description, quantity, value, and destination. It also contains details of the
transporter, such as their name, vehicle number, and transport document number.

The E-way bill is valid for different periods, depending on the distance traveled by the goods.
For example, if the distance traveled is less than 100 km, the E-way bill is valid for one day. If
the distance is between 100 and 300 km, the E-way bill is valid for three days, and if the distance
is more than 300 km, the E-way bill is valid for five days.

The E-way bill is intended to prevent tax evasion and improve the efficiency of the logistics and
transportation industry. It ensures that the movement of goods is tracked and that the correct
amount of tax is paid. Failure to generate an E-way bill can result in penalties and fines.

In summary, E-way bill is an electronic document required for the movement of goods worth
more than Rs. 50,000 from one place to another. It is generated through the GSTN portal and is
used to track the movement of goods in real-time. The E-way bill is mandatory for all interstate
movement of goods, and it is intended to prevent tax evasion and improve the efficiency of the
logistics and transportation industry.

Composite scheme in GST

The Composition Scheme is a simplified tax scheme under GST that is available to small
taxpayers. It allows eligible taxpayers to pay tax at a lower rate on their turnover, instead of
paying tax at the normal GST rates.

Under the Composition Scheme, a taxpayer is required to pay tax at a fixed percentage of their
turnover, and they are not required to maintain detailed records of their sales and purchases.
However, they are also not eligible to claim input tax credit on their purchases.

To be eligible for the Composition Scheme, a taxpayer must have a turnover of up to Rs. 1.5
crore in a financial year, and they must deal only in goods (services are not covered under the
scheme). Certain types of taxpayers, such as manufacturers of ice cream, pan masala, and
tobacco products, are not eligible for the Composition Scheme.

The tax rate under the Composition Scheme varies depending on the type of taxpayer. For most
taxpayers, the tax rate is 1% of their turnover, while for restaurants and certain other businesses,
the tax rate is 5% of their turnover.

The Composition Scheme is intended to provide relief to small taxpayers who may find it
difficult to comply with the complex GST regulations. It simplifies the tax process and reduces
the compliance burden for eligible taxpayers.

In summary, the Composition Scheme is a simplified tax scheme under GST that is available to
small taxpayers with a turnover of up to Rs. 1.5 crore. It allows eligible taxpayers to pay tax at a
fixed percentage of their turnover, instead of paying tax at the normal GST rates. The scheme
simplifies the tax process and reduces the compliance burden for eligible taxpayers.

Applicable of composite scheme

The Composition Scheme under GST is applicable to small taxpayers who meet the following
conditions:

1. Turnover: The taxpayer's turnover should be up to Rs. 1.5 crore in the preceding financial
year. This threshold limit is Rs. 75 lakhs for businesses operating in some North-Eastern
and hilly states.

2. Goods: The taxpayer must deal only in goods. Service providers are not eligible for the
Composition Scheme. However, some service providers such as restaurants and catering
businesses are eligible for the scheme.

3. Interstate Supplies: The taxpayer should not make any interstate supplies of goods.

4. Registered: The taxpayer should be registered under GST. However, taxpayers who are
registered under the GST composition scheme are not eligible to collect tax from their
customers.

5. No input tax credit: A taxpayer registered under the Composition Scheme cannot claim
input tax credit on the goods purchased or services availed.

It is important to note that some businesses are not eligible for the Composition Scheme, such as
manufacturers of ice cream, pan masala, and tobacco products. Additionally, taxpayers who opt
for the Composition Scheme must file quarterly returns instead of the regular monthly returns
filed by other taxpayers.

In summary, the Composition Scheme under GST is applicable to small taxpayers with a
turnover of up to Rs. 1.5 crore who deal only in goods, do not make any interstate supplies of
goods, are registered under GST, and cannot claim input tax credit on the goods purchased or
services availed. However, some businesses are not eligible for the scheme, and taxpayers who
opt for the scheme must file quarterly returns.

Advantages and disadvantages of composite scheme in GST

Advantages of Composite Scheme in GST:

1. Lower Tax Rates: Taxpayers who opt for the Composition Scheme pay tax at a lower rate
on their turnover, which can help to reduce their tax burden.

2. Simplified Compliance: Taxpayers registered under the Composition Scheme are

required to file quarterly returns instead of monthly returns, which reduces their
compliance burden.

3. Reduced Record-Keeping: Taxpayers registered under the Composition Scheme are not
required to maintain detailed records of their sales and purchases, which reduces their
record-keeping burden.

4. Limited Compliance Requirements: The Composition Scheme has fewer compliance

requirements than the regular GST scheme, which makes it easier for small taxpayers to
comply with the regulations.
Disadvantages of Composite Scheme in GST:

1. No Input Tax Credit: Taxpayers registered under the Composition Scheme cannot claim
input tax credit on their purchases, which increases their cost of doing business.

2. Limited Business Activities: Taxpayers registered under the Composition Scheme are
only allowed to deal in goods and are not allowed to make any inter-state supplies. This
can limit the scope of their business operations.

3. Limited Eligibility: Not all businesses are eligible for the Composition Scheme, and
certain types of businesses, such as manufacturers of ice cream, pan masala, and tobacco
products, are not eligible for the scheme.

4. Restriction on Tax Collection: Taxpayers registered under the Composition Scheme are
not allowed to collect tax from their customers. This can be a disadvantage for businesses
that have a high proportion of unregistered customers who cannot avail of input tax credit.

In summary, the Composition Scheme in GST has advantages such as lower tax rates, simplified
compliance, reduced record-keeping, and limited compliance requirements. However, it also has
disadvantages such as no input tax credit, limited business activities, limited eligibility, and
restrictions on tax collection. The decision to opt for the Composition Scheme depends on the
specific circumstances and business needs of the taxpayer.

Who should register under GST

As per the GST law, any person or entity involved in the supply of goods or services or both,
with a turnover exceeding the threshold limit, is required to register under GST. The threshold
limit for GST registration is Rs. 20 lakhs for most states in India, but it is Rs. 10 lakhs for special
category states such as the North Eastern states, Uttarakhand, Himachal Pradesh, and Jammu &
Kashmir.

In addition to the above, the following persons or entities are also required to register under GST:

1. Casual Taxable Person: A person who supplies goods or services or both occasionally in
a taxable territory where he/she does not have a fixed place of business.

2. Non-Resident Taxable Person: A non-resident person who supplies goods or services or

both in India.

3. Input Service Distributor (ISD): An office or a person who receives tax invoices for input
services and issues tax invoices for the distribution of input tax credit to the registered
persons under him/her.

4. E-commerce Operator: Any person who operates or manages an electronic platform for e-
commerce.

5. Every person supplying online information and database access or retrieval services from
a place outside India to a person in India, other than a registered person.

6. Any person who is liable to pay tax under reverse charge.

 7. Any person who is required to deduct tax at source.

In summary, any person or entity involved in the supply of goods or services or both, with a
turnover exceeding the threshold limit, is required to register under GST. Additionally, there are
certain other categories of persons who are required to register under GST, such as casual taxable
persons, non-resident taxable persons, input service distributors, e-commerce operators, and
those liable to pay tax under reverse charge or required to deduct tax at source.

Time and value of supply of goods and services in GST

In GST (Goods and Services Tax), the time and value of supply of goods and services are
important factors in determining the tax liability of a supplier.

Time of Supply:

The time of supply refers to the point in time when the goods or services are deemed to be
supplied and therefore liable for GST. The time of supply varies depending on whether the
supply is of goods or services.

For goods, the time of supply is the earliest of the following dates:

Date of issuance of invoice

Date of receipt of payment

Date of delivery of goods

Date of transfer of goods

For services, the time of supply is the earliest of the following dates:

Date of issuance of invoice

Date of receipt of payment

Date of completion of service

Date of cessation of service

Value of Supply:

The value of supply refers to the transaction value, which is the price actually paid or payable for
the goods or services. The transaction value is inclusive of all taxes, discounts, and other charges
related to the supply of goods or services.

In cases where the transaction value cannot be determined, the value of supply is determined
through other methods as per the GST rules, such as the cost of production or comparable
transactions.

The time and value of supply are crucial in determining the tax liability of a supplier, and it is
important for businesses to maintain accurate records and comply with the GST regulations.
Time and Value of Supply

Time and value of supply of goods and services

Time and value of supply are important concepts in the context of goods and services taxation.

The time of supply refers to the point in time when a transaction is deemed to have occurred for
taxation purposes. In most cases, this is the time when the goods or services are supplied or when
an invoice is issued, whichever comes earlier. The time of supply is relevant because it
determines the point at which GST (Goods and Services Tax) or VAT (Value Added Tax) must
be paid by the supplier of the goods or services.

The value of supply, on the other hand, is the total value of goods or services supplied by a
business in a taxable period. This value is used to calculate the amount of tax payable by the
supplier. The value of supply can be calculated in a variety of ways depending on the specific tax
regime in place, but generally it includes the cost of goods or services, any taxes or duties
payable on those goods or services, and any other charges or fees associated with the transaction.

Together, the time and value of supply play an important role in determining the amount of tax
payable by businesses on their goods and services transactions. By properly understanding and
accounting for these concepts, businesses can ensure that they remain compliant with their tax
obligations and avoid any penalties or legal issues that may arise from non-compliance.

Principles for determining the place of supply of goods and services

The place of supply rules determine which jurisdiction's tax laws apply to a particular transaction
involving goods or services. These rules are important because they determine whether a
business is liable to pay tax in a particular jurisdiction and, if so, at what rate.

The principles for determining the place of supply of goods and services can vary depending on
the specific tax regime in place, but some common principles include:

Location of the customer: In many cases, the place of supply of goods or services is determined
based on the location of the customer. For example, if a business sells goods to a customer in a
different country, the place of supply may be considered to be in that country for tax purposes.

Location of the supplier: In some cases, the place of supply may be determined based on the
location of the supplier. For example, if a business provides services from a location in a
particular jurisdiction, the place of supply may be considered to be in that jurisdiction.

Type of goods or services: The type of goods or services being supplied can also play a role in
determining the place of supply. For example, if a business provides digital services, the place of
supply may be determined based on the location of the customer or the location of the server
used to provide the service.

Place of delivery: In some cases, the place of supply may be determined based on the place
where the goods are delivered. For example, if a business delivers goods to a customer in a
different country, the place of supply may be considered to be in that country for tax purposes.
Use and consumption: The place of supply may also be determined based on the intended use or
consumption of the goods or services. For example, if a business provides consulting services to
a client who intends to use those services in a particular jurisdiction, the place of supply may be
considered to be in that jurisdiction.

These are just some of the principles that may be used to determine the place of supply of goods
and services. It is important for businesses to understand the specific rules that apply to their
particular circumstances in order to ensure compliance with tax laws and regulations.

What are the various exemptions under GST?

Under the Goods and Services Tax (GST), there are various exemptions provided for certain
goods and services. These exemptions vary depending on the specific jurisdiction and can
change over time as the tax laws evolve. Some common exemptions under GST include:

Small business exemptions: In some jurisdictions, small businesses with an annual turnover
below a certain threshold may be exempt from GST registration and filing requirements.

Basic food items: Basic food items such as fresh fruits and vegetables, meat, milk, and bread are
often exempt from GST.

Education and healthcare: Education and healthcare services are often exempt from GST in order
to ensure that these essential services remain accessible to all.

Financial services: Certain financial services such as interest on loans, insurance premiums, and
securities trading are often exempt from GST.

Government services: Many government services, including postal services, passport services,
and public transportation, are exempt from GST.

Charitable and religious organizations: Charitable and religious organizations are often exempt
from GST on donations and other contributions.

Exported goods and services: Goods and services that are exported to other countries are often
exempt from GST.

It is important to note that while exemptions may be available for certain goods and services,
businesses may still need to register for GST and file returns even if they do not collect GST on
exempted supplies. Additionally, some jurisdictions may have different rules regarding
exemptions, so it is important for businesses to consult with a tax professional to ensure
compliance with local laws and regulations.

Reverse charges in GST

Reverse charge is a mechanism under GST where the recipient of goods or services is liable to
pay the tax instead of the supplier. This means that the burden of payment of tax is shifted from
the supplier to the recipient. Reverse charge applies in certain situations, as specified by the GST
law.
Under the reverse charge mechanism, the recipient of goods or services is required to pay the tax
directly to the government instead of the supplier. The supplier is not required to pay the tax on
such supplies, but the recipient is required to comply with the registration and other compliance
requirements under GST.

The following are some instances where reverse charge mechanism applies:

1. Goods or services received from an unregistered supplier: If a registered person buys

goods or services from an unregistered supplier, then the registered person is required to
pay the tax on such supplies under reverse charge.

2. Services provided by a person located outside India to a person located in India: If a

person located outside India provides any services to a person located in India who is not
a registered taxable person, then the recipient of services in India is required to pay the
tax on such supplies under reverse charge.

3. Goods or services received by a registered person from a composition dealer: If a

registered person buys goods or services from a dealer registered under the composition
scheme, then the registered person is required to pay the tax on such supplies under
reverse charge.

4. Certain specified goods and services: The government may notify certain goods or
services on which reverse charge will apply.

In summary, reverse charge is a mechanism under GST where the recipient of goods or services
is liable to pay the tax instead of the supplier. Reverse charge applies in certain situations such as
goods or services received from an unregistered supplier, services provided by a person located
outside India, goods or services received from a composition dealer, and certain specified goods
and services notified by the government.

Concept of ITC in GST

Input Tax Credit (ITC) is a key feature of GST that allows taxpayers to claim credit for the taxes
paid on their purchases of goods and services used in their business. ITC is the credit that a
registered taxpayer can claim for the tax paid on inputs used in the supply of goods or services or
both.

In simple terms, if a registered person buys goods or services from a registered supplier, he can
claim the tax paid on such purchases as input tax credit, and use it to offset the tax liability on his
output supplies. This helps in avoiding the cascading effect of taxes and results in the overall
reduction of tax liability.

For example, if a manufacturer buys raw materials worth Rs. 1,00,000 from a registered supplier
and pays Rs. 18,000 as GST, he can claim the entire Rs. 18,000 as input tax credit. If the
manufacturer sells finished goods worth Rs. 1,50,000 and charges Rs. 27,000 as GST, he can
reduce his tax liability by the amount of input tax credit claimed, i.e., Rs. 18,000, and pay only
the balance tax of Rs. 9,000.
However, in order to claim input tax credit, the taxpayer must ensure that the tax invoice and
other prescribed documents are in order, and that the goods or services for which the credit is
claimed are used or intended to be used in the course or furtherance of his business. The taxpayer
must also ensure that the supplier has deposited the tax with the government.

In summary, Input Tax Credit (ITC) is the credit that a registered taxpayer can claim for the tax
paid on inputs used in the supply of goods or services or both. It allows the taxpayer to reduce
his overall tax liability and avoid the cascading effect of taxes. However, certain conditions must
be met to claim input tax credit.